To catch up on previous posts

Select Performance Indices of the Nigerian Capital Market (Continued)

2. Total Equity Listed

Every corporation that wants to trade in the Nigerian Capital Market, must be listed and their data and numbers reported accurately and timely as much as possible. And this process often requires an intermediary to validate and verify all equity transactions to be listed.

If all the equities to be listed are on a smart contract in a decentralized ledger system, numbers, data and information would be readily available at the speed of light. This would drive efficiency and effectiveness in the Nigerian Capital Market and boost investor confidence in the capital market. This is because, available data is readily validated, and updated simultaneously on the distributed ledger for both the regulators and investors to access instantly, thus reducing systemic risk and improving systemic stability with the elimination of an intermediary process and adoption of a consensus mechanism based on smart contracts and blockchain.

This would drive more listing in the capital market, more investment and as stated, improved confidence in the efficiency and effectiveness of the Capital Market. This would have a direct impact as well on the total volume and value traded in the capital market…it would increase it conservatively by 150x.

Another offshoot benefit of smart Contract for equities listed on the capital market is that, since there is simultaneous access to data by both regulators and investors, respective corporations will be more opened to scrutiny of their books thus eliminating fraud. This is one of the major benefits of Blockchain technology, transparency and immutability of records. This was the view of Don Tapscott when he stated that, “The blockchain’s public nature—its transparency, its searchability—plus its automated settlement and immutable time stamps, allow regulators to see what’s happening, even set up alerts so that they don’t miss anything.” (Tapscott & Tapscott, 2016)


Category  Number Listed  Market Capitalization (NGN) As of Mar 31, 2020  Market Capitalization (USD)* As of Mar 31, 2020,
Equities – Premium Board  8 5,402,276,350,071.70 14,011,869,666.90
Equities – Main Board  141 5,677,785,355,381.18 14,726,456,634.37
Equities – ASeM  9 7,042,454,102.34 18,265,994.30
Equities – REITs and CEFs  5 23,691,155,916.90 61,447,687.50
Exchange Traded Products  10 6,187,927,288.62 16,049,610.40
FGN Bonds  87 12,644,529,706,523.00 32,796,082,755.86
Corporate Bonds  27 378,817,110,000.00 982,536,921.28
State and Municipal Bonds  20 369,697,562,190.00 958,883,574.61
Supranational Bonds  1 3,237,500,000.00 8,397,095.06
Memorandum Listings**  51 999,908,363,891.81 2,593,459,639.20
Total  359  25,513,173,485,365.50  66,173,449,579.47 
* Exchange rate $1 = N385.55 – NAFEX as of Mar 31, 2020
** Net Asset Value (NAV) of Memorandum Listings culled from SEC Weekly Collective Investment Schemes Report as of Mar 27, 2020.
Excludes Allan Gray Africa Equity Fund, Intercontinental Integrity Fund and the Continental Unit Trust Fund.
Ref: 20200331
Copyright © 2020 [The Nigerian Stock Exchange]. All Rights Reserved

From the table above, if Blockchain based smart contract is introduced, by our postulations of 150x conservatively, these numbers would rise radically based on blockchain projections. This numbers would increase greatly once it is implemented.

3. Total New Issue

According to SEC, New Issues are “Securities of a government or corporate entity newly created and offered for subscription to the public, or to a select group of investors, in the case of private placement, or to a company’s existing shareholders as with rights issues. New issues are a means of raising funds for development financing and do enlarge the paid-up capital of a company.” (SEC Nigeria, 07/03/2016).

To reduce costs and improve efficiency, the issuance of new securities can be developed on new applications that leverage on blockchain technology. Capgemini captures it this way that, “Physical certificates/notes and securities can be represented digitally in a public permissioned ledger, replacing a paper-intensive, manual process with smart contract-led automation, reduction of intermediaries, and fully automated asset servicing.”(Vakta, Maheswari, & Mohanan, 2016).

Key Players in the Security issuance process

Figure 5 Key Players in the Security Issuance Process (Vakta, Maheswari, & Mohanan, 2016)
Figure 6: Overview of Securities Issuance Process (Vakta, Maheswari, & Mohanan, 2016)

There are many intermediaries in the process of new issue in the Capital Market. This prolongs the process and makes it rather cumbersome for all the participants in the process chain. Both the operators, investors and regulators will have to depend on each segment of the chain to be completed before moving on to the next segment. However, with a Blockchain based smart contract, this process can be shortened, and cost saved drastically. Blockchain technology supports and facilitates the direct issuance of digital securities by issuing them on the distributed ledger through standardized and secure transactions, which allows direct dealings between issuers, syndicate members, the Capital Market and the investment bank. Smart contracts are embedded into the security from the onset till the end of the whole process thus allowing automation by carrying out terms of the agreements on the blockchain. The benefits on the issuance of securities on a blockchain can have many positive ripple effects across the asset lifecycle. Smart contracts would sit on top of these distributed ledgers and would facilitate auto-execution of the terms and conditions as well as confidentiality agreements associated with any contract without manual or human intervention. According to Capgemini Report, “The smart contracts are programmed with the contents of these terms and conditions, and the agreements and their executions are triggered by sending transactions to those contracts along with some money.” (Vakta, Maheswari, & Mohanan, 2016)

Figure 7: Distributed Ledger Setup (Source: Financial Markets Group, Federal Reserve Bank of Chicago)
How New Issue would operate in a blockchain based smart contract


We have examined three selective performance indices of the Nigerian Capital Market and how blockchain technology impacts their functions. We have pointed out as well, the current modus operandi in the Capital Market that can be revamped with a blockchain based smart contract.

A blockchain based Capital Market Performance would be measured on efficiency, effectiveness, speed, transparency, risk mitigation to mention a few.

The image below puts in brief, the benefits of a Blockchain-based Capital:

Figure 8: Blockchain in brief (Source: ATS, Advanced Technology Solutions)


The adoption of Blockchain Technology by the Nigerian Capital Market would be crucial in positioning the country on the forefront of change agents in the technology space on the continent of Africa. Nigeria’s bragging rights as the giant of Africa can only be more amplified if the country’s financial services are positioned in alignment with global trends on the foundation of Blockchain Technology. The select performance indices of the Nigerian Capital Market, when entrenched into a smart contract based on blockchain would reduce drastically inefficiencies in the system and mitigate against systemic risk and subjectivity that the system is used to currently. There is a tremendous potential in having a blockchain based ecosystem, that would bring about a fundamental change to the system and with these key attendant benefits:

  1. Disintermediation of trust/Transparency
  2. Immutability of record
  3. Smart contracts reduce the need for manual intervention

We must state in closing as well, that there are hurdles to be crossed in adopting this nascent technology. We would just briefly mention the hurdles: 

  1. Scalability of the technology: Due to its nascent nature, to scale up existing systems to blockchain technology-based systems might require some huge outlay and a total re-orientation to how the system and process works.
  2. Regulation and legislation: Regulators in Nigeria would have a major challenge trying to find the appropriate legislation to guide the mode of operation of the blockchain technology as it would be totally different from what obtains in the traditional sense of things. It would require an unlearning to relearn how the blockchain system works.
  3. Common standards and governance: Will all organisations and industries at large be completely opened in the design and implementation of the blockchain systems at their various fields? Will the codes written for the different companies be interoperable amongst all organisations and networks? There will need to be clear agreement on how blockchains will be managed and improved once they are set on live. This would involve governance processes, update approvals, roles and responsibilities, etc.

These are just hookups in the process that can be resolved once a properly defined structure is in place to direct and guide the operation of blockchain technology. The Pros totally outweighs the cons when it comes to implementing blockchain technology in the Nigerian Capital Market space. Blockchain technology can be adopted and incorporated gradually into the performance indices of the Nigerian Capital Market, then a gradual easing into the core operational procedure of the market as well. Ultimately, the wind of change would sweep across the financial services and all would be adopting a blockchain based smart contract that guides their operations and eliminates inefficiency and it is cost and time savings as well.

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